Experiments and computer simulations demonstrate that water spontaneously fills the hydrophobic cavity of a carbon nanotube. To gain a quantitative thermodynamic understanding of this phenomenon, we use the recently developed two phase thermodynamics method to compute translational and rotational entropies of confined water molecules inside single-walled carbon nanotubes and show that the increase in energy of a water molecule inside the nanotube is compensated by the gain in its rotational entropy. The confined water is in equilibrium with the bulk water and the Helmholtz free energy per water molecule of confined water is the same as that in the bulk within the accuracy of the simulation results. A comparison of translational and rotational spectra of water molecules confined in carbon nanotubes with that of bulk water shows significant shifts in the positions of the spectral peaks that are directly related to the tube radius. (C) 2011 American Institute of Physics. [doi:10.1063/1.3571007]